Company Law

Revision No. 20  -  Last Updated : 09-10-2002

The Maltese Companies Act, 1995, is based primarily on UK company law principles but has also been harmonised with the EU Directives.

Accordingly, like UK law, Maltese company law distinguishes between 2 main types of companies, namely the:

·         private limited liability company; and

·         public limited liability company.

Whereas public companies may offer their shares to the investing public, private companies are prohibited from doing so.  Transfer of shares in private companies is restricted in that shareholders must first offer their shares to the other existing shareholders before offering them to third parties.

A private company may opt for private exempt status in which case it may have a single shareholder.  However, the main relevance of the private exempt company is for accounting purposes since such companies may submit fewer accounting documents to the Registrar of Companies (the official appointed by Government to ensure that limited companies abide by the provisions of the Companies Act, 1995).

Incorporation

Incorporation of a company under Maltese law takes place by filing a document known as a Memorandum and Articles of Association.  This document essentially constitutes a contract between the shareholders that are forming the company. 

The Memorandum describes the nature of the company in formation and must contain the following information:

·        the name of the company;

·        an indication whether the company is a public or private company;

·        personal details of each of the shareholders (i.e. name, address in full and passport number);

·        the objects of the company;

·        the registered office in Malta of the company;

·        the authorised and issued share capital of the company, divided into shares of a fixed nominal value;

·        the number of shares taken up by each shareholder and the amount paid up in respect of each share;

·        the number of directors and their personal details;

·        the manner in which the legal and judicial representation of the company is to be exercised and the name of the first person/s vested with such representation; and

·        personal details of the first company secretary.

The Articles, on the other hand, contain the rules by which the company shall regulate its internal affairs such as, for example, the procedure to be followed during board meetings, transfer and transmission of shares etc..

 Name

The name of a private company must end with the words ‘Ltd.’ whereas a public company must have ‘p.l.c.’ at the end.  Naturally, a company name must not be identical or even similar to the name of another company already in existence.

Company names may be reserved with the Registrar of Companies for a period of 3 months. 

 Objects

The objects of a company may not simply be stated to be any lawful purpose or trade in general but the main trading activities must be described in detail.  Generally, however, the objects are drafted in such a way as to make their interpretation as wide as possible.

The law provides that, where an act of the company falls outside its objects, the company shall not be bound if it proves that when the act was done, the third party knew that the act was outside the company’s objects or that the third party could not, in the circumstances, have been unaware thereof.

The objects clause of a private exempt company must specify which activity of the company shall be its main trading activity.

Shareholders

Every private company must have, at least, 2 shareholders who may be individuals or corporate.  In order to satisfy this requirement, the practice is for a third party (who may be any advocate of our Firm) to hold a single share with all the other shares being held by the intended beneficiary.

A private exempt company may, on the other hand, opt to have a single shareholder.

There are no nationality requirements as to both the shareholders and directors.  However, if the shareholders are non-residents, authorisation from the Malta Financial Services Centre (MFSC) is required before incorporating the company.  This is readily available after the MFSC views a banker’s reference from each shareholder and determines that they are competent and financially sound.

It is not possible to have bearer shares.

 

Nominee Shareholding

Shareholders may choose to remain anonymous by utilising the services of a licensed nominee company.  Our Firm offers the provision of nominee shareholders or directors through its associated licensed nominee company, Venture Services Limited. 

Should these services be required, each and every non-resident shareholder/director of the company should provide the following details and documentation:

1.         A letter from their bankers stating that the person is known to them and is able to operate a bank account.  This letter must include a specimen signature of the shareholder which must appear on the same letter.

2.         A letter from any professional person (e.g. lawyer, accountant, notary etc.) stating that the person in question is honest and trustworthy.

3.         The name, address in full, telephone and fax numbers of each and every shareholder and director.

4.         A photocopy of their passports.

5.         A short business curriculum vitae.

In addition, the non-resident shareholders should sign a Fiduciary & Management Agreement and, if required, a Special Power of Attorney empowering Venture Services Limited to sign the Memorandum and Articles of Association of the company on their behalf.

 

Share capital

The authorised and issued share capital cannot be:

·        less than 500 Malta liri (approximately US$1,250) subscribed by 2 persons which has to be, at least, 20% paid up (i.e. approximately US$250) on signing of the Memorandum in the case of a private company; or

·        less than 20,000 Malta liri (approximately US$50,000) that has to be subscribed by 2 persons and, at least, 25% paid up (i.e. approximately US$12,500) on signing of the Memorandum in the case of public companies.

Any foreign convertible currency may be used (including the Euro).

In the case of a private exempt company, the issued share capital need only be subscribed by 1 shareholder.

Directors

Private and private exempt companies must have, at least, 1 director who need not necessarily be a Maltese resident.  Nominee directors may be used.

Public companies, on the other hand, must have a minimum of 2 directors.

Private exempt companies cannot have corporate directors.

In the case of a public company only, a director must personally, or through his agent, sign the memorandum of association indicating his consent to act as director.

 

Company Secretary

The company secretary is the company official charged with ensuring that the company observes all the provisions of the Companies Act.  Accordingly, the company secretary must, inter alia, keep the register of shareholders in order; take down the minutes of the meetings of the Board of Directors and the General Meetings of the shareholders; ensure that the Registrar of Companies is notified with documents according to Law, including the Annual Return; notify the shareholders and directors of the date, place and time of meetings etc..

All companies must appoint a company secretary.  In a private exempt company only, the sole director may also act as company secretary.  The company secretary must be a natural person.  If required, our Firm offers company secretary services.

 

 Registered Office

Every company must have a registered office situated in Malta.  Our Firm provides registered office facilities in Malta.  Thus, according to established practice, if the company does not have its own offices/premises here, the registered office of the company may be the address of Emmanuel Mallia & Associates (Advocates).

Legal and judicial representation of the company

Generally speaking, the director/s are vested with the legal representation of the company.  With respect to the judicial representation of the company, this is generally vested in one or more of the directors or shareholders of the company, though any advocate of our Firm may appear in such capacity. 

Management and Administration

The management and administration of a company, whether public or private, is in the hands of the Board of Directors.  The directors are empowered to exercise all the powers of the company, except those that have been reserved to the shareholders by the Articles of Association or by Law.

How often the Board of Directors meets is, generally, left up to the Articles of Association which regulates these matters.  In practice, however, meetings need not be formally held since our law provides that resolutions in writing signed by all the directors, shall be valid and effectual as though they had been passed at a meeting of the directors duly convened and held.  Likewise, the Articles of the company may regulate the place where board meetings are held.

The Companies Act provides that the shareholders in General Meeting must meet, at least, once a year.  The first General Meeting of the company must be held within 18 months of the company’s incorporation.  Thereafter, a company must hold its annual General Meeting every 15 months but, at least, once in every calendar year. 

In the case of private companies only, a resolution in writing signed by all the members entitled to vote at the General Meeting shall be valid and effective as if the same had been passed at a General Meeting including the Annual General Meeting of the company duly convened and held.  However, a director or auditor may not be removed from office by such a resolution in writing.

Accounts

I. Accounting records to be kept

All companies must maintain proper books of accounts which give a true and fair view of the state of their affairs and which explain their transactions thereby enabling the balance sheets and profit and loss accounts to be prepared.  In so doing, companies are bound to follow ‘generally accepted accounting principles and practices’.  This requires adherence to International Accounting Standards.

II. Form and content of accounts

All companies must prepare individual accounts comprising the:

·         balance sheet;

·         profit and loss account;

·         directors’ report; and

·         notes to these accounts. 

In addition, the Law provides that a Certified Public Accountant and Auditor must audit these financial statements.  These accounts must be delivered to the Registrar of Companies by the accounting reference date.  A company may, in the first 9 months from registration, choose its accounting reference date.  In the absence of any request to the Registrar of Companies, a company’s accounting reference date shall be the 31^st December.

Private exempt companies, which qualify as ‘small’, need only deliver to the Registrar of Companies an abridged balance sheet, all the notes to the balance sheet and the auditors’ report (i.e. without the profit and loss account and the directors’ report).

A company shall draw up its accounts in the same currency of its share capital.

In addition, all companies are bound to file with the Registrar of Companies an Annual Return Form wherein details about the company’s share capital, shareholders, directors and secretary are laid out together with payment of a registration fee which is calculated depending on the authorised share capital of the company.  This varies between a minimum of 50 and a maximum of 250 Malta liri (approximately US$ 125 - 625).

 

Time, Costs and fees

The length of time needed to incorporate a company depends on the type of company to be formed.  Generally, however, the process takes as little as 3 days from when all information and documentation requested is available and in order.

The formation of a company involves professional and ancillary fees together with the payment of a once-only registration fee to the Registrar of Companies ranging from a minimum of 100 Malta liri (approximately US$250) to a maximum of 573 Malta liri (roughly US$1,500) depending on the authorised share capital of the company.  The following table is a useful guide:

If a company, subsequently, increases its authorised share capital, the difference in registration fees would be levied.

A minimal charge is also levied per official copy ordered of the Memorandum & Articles of Association of the company

 

 

Stamp Duty

No stamp duty is payable on incorporation of a company.  However, under Malta’s Duty on Documents and Transfers Act, the following stamp duties are payable:

·         share transfers:         2% of the consideration (or 5% if the company assets comprise assets of an immovable nature situated in Malta)

·         causa mortis transfers:         2% of the value

Taxation of companies

The company rate of tax is a flat-rate of 35% on the chargeable profits based on the audited accounts of the company.  However, significant fiscal benefits are granted to certain types of Maltese companies beneficially owned by non-residents.

Among these companies is the International Trading Company (ITC) which, whilst being a normal private company, has its objects clause expressly restricted to carrying out trading activities from Malta, but not in Malta, with individuals or companies not resident in Malta.  Malta’s full imputation system and the tax refunds contained in our legislation ensure that, upon a distribution of dividends to non-resident shareholders or to Maltese company shareholders 100% owned by non-residents, ITCs pay a net effective tax in Malta of 4.17%.

In addition, non-residents shareholders of a Maltese International Holding Company (IHC) in receipt of a dividend derived from profits emanating from a ‘participating holding’ in an overseas company may claim a 100% refund of the tax suffered in Malta.

The significance of these fiscal exemptions can only be fully appreciated if one views them in conjunction with the double taxation relief that the shareholders may then receive when the dividends are remitted back to their country of residence.  In this respect, Malta, currently, has 29 Double Taxation Treaties in force and another 12 that have been initialed and are awaiting ratification. 

Downloads:

·                     This Document in PDF Format.

·                     Fiduciary and Management Agreement

·                     Maltese Company information sheet

·                     Nominee Service Agreement in English

·                     Nominee Service Agreement in Italian

·                     Schedule of Professional Fees re Companies

Further Reading

·                     International Holding Companies

·                     International Trading Companies

·                     Guide to Taxation

·                     Relief from Double Taxation

·                     Registration of Foreign Companies in Malta